Better universal knowledge and prediction of storms will lead to smaller profits and more government regulation for property catastrophe reinsurers, a leading reinsurer and economist said.

Speaking at the Climate Prediction and Insurance Risk Conference at the Marriott Castle Harbour Hotel, Dr. James Stone said: "Advancing the field of knowledge in climate science, cost the reinsurer profits.'' That may be, at first blush, surprising, because he is the man who conceived, and then convinced his fellow directors of Bermuda-based property catastrophe reinsurer, Centre Cat, to sponsor this week's conference.

Dr. Stone said that as an investor and director at Centre Cat, he was motivated to support the research on storms because he knew that the company that keeps up with advances of scientific research will have a market advantage.

He argued: "Suppose we knew more than our competitors did about long term trends in hurricane frequency and severity and thus had a better idea of what the total storm losses would be from now until the year 2010.

"Wouldn't we then be able to make more profitable decisions about when to raise capital and when to give it back to shareholders? Those are among the things we talk about in board meetings and that kind of prediction would help.

"Wouldn't we be better able to look at the market today, compare it with the future trends, and decide more accurately than others whether to lengthen or shorten our treaty relationships? I think so.

"Wouldn't we on a grander scale have an advantage if we decided to acquire one of our competitors, or try to set a price for doing so? Sure we'd want to know what the future is, whether that capital is adequate, what the right price to pay for a franchise is.

"There's a host of other decisions that follow from these, a very small advantage in foresight about the underlying risk recovery, can be a tremendous advantage to business.

"It is for that reason that members of this industry should want to be actively involved in the science of climate. They should want to fund it. They should want to understand it. Because if they don't, one of their competitors will do it better.'' Dr. Stone said that the most interesting advances are being made in the predictive science of hurricanes, as opposed to earthquakes, typhoons, tornadoes and other natural disasters.

He is the founder and president of The Plymouth Rock Company, which owns or controls several property and casualty insurance carriers and providers of insurance brokerage and management services.

He is a former Massachusetts state insurance commissioner, an economist and author who former US President Jimmy Carter, appointed commissioner and chairman of the Commodity Futures trading Commission, the federal agency that regulates futures trading in more than 60 commodities.

He told the conference yesterday that primary insurance carriers can't buy all of the needed reinsurance for their storm damage policies, because they'd never make a profit at current market prices.

Funding research for hurricanes "That means we are all at great risk,'' he said. "You just saw, in the case of 20th Century of California that that great risk really is betting the barn.

The executives are betting their jobs, the stockholders are betting all their money.

"There aren't many times in a business when you have to bet the barn, but of hurricanes, that's what we are doing. And there is no way in this market to avoid that.'' He said that people have been moving to coastal areas and by 1992, one in four Americans (60 million) lived in a county on the Atlantic coast. The value of insured properties in coastal counties is now over $2 trillion.

Said Dr. Stone,"Catastrophes between 1989 and 1992 resulted in as much cost as was paid out in the 26 preceding years combined. And of course, this year, I probably wasn't the only one who wondered what they do when they run out of letters (for naming Atlantic Storms) of the alphabet.

"This is certainly a year that doesn't look like the storm activity years of the sixties, seventies and eighties.'' The question for insurers and reinsurers is whether or not the hurricane activity of the next 20 years will look like the most recent years or those years before.

For scientists, at a time when Government research money is beginning to dry up, they can at least be assured that insurers and reinsurers want to help fund further study in the prediction of natural disasters.

Dr. Stone said that practical research questions generally produce the best scientific work, when the problems are relevant and immediate.

Business houses will pay for the research, because they are primarily interested in long term prediction.

MR. PHILIP BLAIS -- Seen speaking at the 26th Watson Wyatt D&O Symposium at Marriott's Castle Harbour yesterday.

Dr. James Stone